6 Month Market Forecast
The correction in the markets today is casting a shadow on the 6 month forecast. Everything was rolling along (and still is) however a number of investor doubts and creeping in as market news and trading volume bottoms out.
The Dow Jones, S&P 500 and NASDAQ all recovered a little after a steep fall Thursday morning. A slower recovery, high job claims numbers, ransomware attacks, Fed tapering announcements and along with growing Covid infections globally is unsettling investors who may not be focused in on their portfolios as closely as summer begins.
Whether tomorrow, next week, or next month, the markets are primed to improve for the last 6 months of this year and into next year. Worries about inflation are being discussed still while others are talking about deflation at some point, yet these worries pale in comparison to the reopening economy and a positive Xmas buying season.
The final growth of the stock market in 2022, really depends on a variety of political factors too. Joe Biden is talking higher taxes, control of monopolies, and a big stimulus plan. Nothing is written in stone, and stimulus talk has been quiet of late. There’s no doubt that stimulus news was driving stock prices and without it, during a quiet summer, you might expect a day or week of price falls.
Smart investors, business owners and home buyers all focus on the 6 month forecast and 5 year outlook as a more reliable guide. In a highly indebted economy based on credit (and big savings too), the Fed and its interest rate intentions are really important. The Fed says it will not raise rates in the next 6 months, so this bodes well for the last half of 2021 and the 2022 forecast.
As a reminder, the Christmas buying season is only about 3 months away, and forecasts are predicting strong Xmas sales.
Key 6 Month forecast factors:
- Powell, FOMC and the Fed: pushing short term inflation to support 2% inflation long term
- Fed is intending to taper its spending spree
- Inflation is considered good for growth, but short term inflation even if it hits 5% to 10% won’t cripple the long term growth trend
- GDP: strong first quarter growth at 6.4%, and Atlanta Fed forecasts a 9.3% rate for 2nd quarter
- Housing Market outlook: construction beginning to rise while prices begin to moderate
- 5 year outlook for the housing market positive given savings rate, demographics, and immigration forecasts
- post pandemic recovery pace easing but is still well above 2019 levels
- Wage Growth : employment rate steadied with slight rise in wages during April (s increased by 21 cents to $30.17)
Workers are reluctant to return to work for a number of reasons, but those reasons will diminish in the coming 6 months with vaccinations and fed payment wage subsidy program ending
- Biden’s stimulus package likely to provide $3 Trillion boost to the economy and could be sustained spending for many years.
- Corporate earnings reports positive heading into summer recovery and business reopening
- Consumer spending rose .5% in April
- travel spending surged in May
- shortages in products and materials likely to spur more investment
- The US Manufacturing PMI index rose to 62.1 in May of 2021 from 60.5 in April. There was a growth in expansion and new orders.
The ISM’s index of national factory activity increased to a reading of 61.2 last month from 60.7 in April. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 60.9 in May. — Reuters’s report.
The Next 6 months is the hot topic as the Xmas season nears.
Do you believe the economic growth last? What will drive it.
Please do share this post generously!
Over the June to December forecast period, we’re going to see more stock market index records. The Dow, S&P, NASDAQ and Russell are poised to reach their respective records soon. Sure there’s debt based crash talk and volatility test investors convictions. Yet, the momentum is clear and any inflation that occurs might encourage more investment (bond market hates inflation).
Take a good look at the fastest gaining small, mid and large cap stocks with an eye on safety and hedging. Experts believe the market will cool, but they’ve been saying that for years, so you have to take their predictions and projections with a grain of salt. See more on the best tech stocks, 5G stocks, and oil stocks.
Covid 19 still influences the markets. Although the new Covid variants are threatening, the vaccinations are progressing fast in the US, so we’ll see the US economy open faster this summer. By fall, which will be within a historically amazing time for retail and industry, and profits and prices will continue very high. Earnings reports are solid. The key is to look for the best value stocks and maybe pass on Bitcoin (although USD isn’t a good investment).
Best Summer Stocks to Buy?
- Wayfair (NYSE:W) (retail furniture boom)
- McDonald’s (NYSE:MCD) (consumer spending, end of covid)
- Carvana (NYSE:CVNA) (used cars)
- Carnival Cruise Lines (NYSE:CCL) (travel and tourism prices rising fast)
- Vail Resorts (NYSE:MTN) (hotels opening up, recreation coming back)
- Visa (NYSE:V) (consumer spending on credit rising)
- Nvidia (NASDAQ:NVDA) (chips for phones, gameplaying, and cars)
The Market is Complicated but Overpowered by Growth
Few indicators suggest a stock market crash or a housing crash and financial collapse is imminent. The crash factors are complex. Complexity with extreme price growth means the threat will surprise everyone. Credit and the stimulus will take care of the next few years. Inflation will happen, but economists don’t believe it will be damaging to growth or profits through 2022.
Americans are worried about a housing market collapse, but with such low housing supply, it’s hard to see anything dropping home prices. Stimulus will grow construction even in a grossly over-regulated housing market. Home prices are surging out of hand this spring and summer. Bidding wars will abound and many homeowners will finally decide to sell to catch some of the windfall. It won’t be a problem after the next six months.
CBO Report: Positive for 5 Years
“Specifically, real (inflation-adjusted) gross domestic product (GDP) is projected to return to its prepandemic level in mid-2021 and to surpass its potential (that is, its maximum sustainable) level in early 2025. In CBO’s projections, the unemployment rate gradually declines through 2026, and the number of people employed returns to its prepandemic level in 2024.” — CBO Overview of the Economic Outlook: 2021 to 2031.
One expert says the euphoria is gone and it’s hard to get investors excited. Well, that just isn’t true. People are still depressed through the pandemic, and are only re-emerging in the spring of 2021. There will be plenty of crazy euphoria by late summer when Covid 19 infections dwindle.
Many of the bears are looking at issues that might not kill the economy for a few years. The Biden stimulus money will help bridge all problems in the next 6 months. One expert believes the stimulus money will actually reach the capital markets this time, where Trump’s stimulus money did not.
Clouding the 3 month and 6 month outlook however, is the aforementioned housing market where a tsunami of evictions and continuing plague of rent defaults threatens. There is a level of volatility, uncertainty and a departure from old statistical trends, that makes stock market outlooks seem sketchy.
Yet if you’re a stock market investor, potential stock investor, home buyer, or employer, you need to be keying in on the core of economic paths (cyclical stocks).
I forecasted a w shaped recovery 4 months ago, and the experts forecasted a V shaped recovery. What may be happening is a K shaped recovery as stimulus has lagged so badly. Yet as the recovery picks up steam, we could see unemployment drop fast as the remaining small businesses reopen. Those survivors will have their markets to themselves as marginal businesses have dropped out.
Housing and Travel Sectors Will Give Markets a Lift
Just last week, we saw air traffic at it’s highest since before the pandemic. That is a significant signal given most prople wouldn’t dare fly as the variants spread.
It will be a while before airlines, cruise lines, hotels, manufacturers, real estate investment firms, big restaurant chains, city transit services, etc. come back to life. New York is in big trouble.
How Will the Housing Market Hold Out?
Right now, the housing market recovery is on a tear. If it wasn’t for the housing shortage, the growth outlook from here forward would be upward. Housing experts forecasted big growth for multifamily, and of course the exact opposite has happened in that that sector. Not a good guess.
Instead, new home construction is the big trend. However, condo and apartment sales are still okay given the fact there’s no where else to live.
With the coming eviction crisis, forecasts are for falling housing prices. A tech slowdown in the Bay Area could see rapid housing value declines there, and in New York, the exodus and rent failure combine to create crash conditions.
Of course, NAR’s latest housing market stats show a healthy market and new home sales are hot.
Real estate is seen as a much better investment and more first time buyers are jumping in. The $5 trillion in the money markets could move to the home purchase markets, thus stimulating banks, consumer sales, and fueling up new home construction. This could raise the outlook for the next 6 months and next 3 years.
The Last 6 Months of 2020
Q3 & Q4 will be fantastic for retail and industry. Consumer spending will boom as Covid is in the rear view and holiday spending in cash and on credit will make a big gift giving season. The euphoria of experiencing normal life without as much fear, will spur spending. Americans have a lot of savings and an awakening spirit of well being again.
Standard Outlook: Recovery in 2021
But the economy could also crash. In fact, even the housing market with its low mortgage rates and vicious shortages of housing stock, and rising new home construction growth could come to a shuddering halt if the Democrats win this election and no vaccine appears.
conference board gdp forecast
Voters May not Care About China’s Danger
And there is no certainty that President Trump can do much with the economy either. His talk about stopping imports from China has largely failed for the last 3.5 years. Manufacturing growth in the US has been disappointing and the imports continue. US exports are poor and now the domestic economy is struggling. Without further major stimulus, the outlook is dire.
And going into the election, one of his biggest promises has evaporated. Tariffs don’t get rid of the trade deficit problem, and China is boasting economic growth.
The Democrats on the other hand, have never said anything negative about China’s communist leaders even though they launched the pandemic, invaded Hong Kong, have enjoyed decades of American technology theft, and taken advantage with special trade status and a ridiculous $500 billion yearly trade deficit with the US.
Yet voters have tired of the President, show no interest in the deficit, supply threats, or International trade, and may be willing to vote for anyone to replace him to then let them do as they please.
That is the precursor of economic disaster.
The key questions economists and reputable journalists are asking is whether Federal funding can continue and whether the Corona Virus pandemic will sweep across the full union like wildfire.
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